Apollo Tyres, the leading home-grown tyre maker, continues to live up to its reputation as the country’s most aggressive tyre brand by embarking on massive global expansion plans and almost doubling profit in the last financial year.
Says Mr. Onkar S. Kanwar, Chairman & Managing Director, Apollo Tyres, in the company’s annual report for FY15: “We widened our global footprint by entering new markets. We made Thailand our ASEAN hub, while also entering new markets like Malaysia, Qatar and Jordan. Our company was commended for its investments in increasing Apollo Vredestein capacity to 6.2 million tyres annually, up from 5.8 million tyres per annum. There was a significant increase in the capacity of off-highway tyres to 25 tonnes at the Kalamassery plant in Kerala, and there are plans to ramp it up to 100 tonnes in the near future. We expanded our association with Manchester United to 66 countries. We successfully sold part of our African subsidiary to Sumitomo. Through the year, the one fact that has bolstered me and taken this company forward is that we are a sound company with a clear vision and with a team which can help us achieve that vision.”
On a stand-alone basis, the company achieved a turnover of Rs. 88,783 million in FY15 as against Rs. 86,101 million in the previous financial year. Net profit for the year was Rs. 6,451 million as against Rs. 4,426 million, a growth of 46 per cent. The consolidated turnover of the company was Rs. 127, 257 million during the year.
“Despite the ups and downs, the year was momentous and will be etched in the annals of Apollo Tyres. It was our decision to go ahead with our first Greenfield in Hungary, the first time that an Indian tyre company has ventured to set up a new plant outside the national boundaries. This second manufacturing facility in Europe, the most demanding and exciting of tyre markets, is critical to further our growth in the Continent. It will augment our capacity in the region and give us a stronger presence in Europe as we reach out to the OE players in the region. Importantly, it will help the company to narrow the gap for the growing demand for its two brands, Apollo and Vredestein, in Europe”, says Mr. Neeraj Kanwar, Vice Chairman & Managing Director.
While the greenfield plant in Hungary was the big news, Apollo’s commitment to India continued. After the mega investment in the Chennai plant a few years back, it announced plans to ramp up the capacity for the second phase of growth for this plant.
Many milestones
Apollo Tyres is divided into two key regions – Asia Pacific Middle East and Africa (APMEA) and Europe and Americas (EA). For Apollo Tyres’ APMEA operations, it was a year of consolidating its leadership position in India, expanding the product portfolio in the existing APMEA markets and pushing into new markets in the region. For these operations, it was a year of product innovations and launches. The year began with the launch of India’s largest loader tyre at IMME 2014. The company also introduced the ALT 188 TL tyre which had the industry’s first traction tread design. It further led its product expansion strategy by introducing the Apollo Tyres and Manchester United co-branded tyres in Thailand. After the UK market, Thailand was the first country to have the Apollo-Manchester United co-branded tyres in Asia.
The region also leveraged Apollo’s global R&D skills to launch a new cross-ply technology-based tyre, AWR-HD, with the Apollo HDF technology, for the Indonesian market. This tyre was specifically engineered for the Indonesian market based on a detailed market study by Apollo’s product and R&D teams on the application of commercial vehicles in this country. The higher horsepower vehicles used for short and long haul applications on roads, which are more than 50 per cent unpaved, have a unique requirement from the company’s tyres, low inflation pressures for heavy load applications.
To consolidate its leadership position in India and offer innovative and 360 degree solutions to customers, the APMEA operations has started to focus on the retreading business in the country.
As radialisation makes deep inroads into the commercial sector, there exists a huge opportunity to tap the growing retreading market. While the unorganised players cater to the current market requirements, customers are looking for retread solutions from tyre manufacturers. The company plans to open 20 branded retread outlets by the end of the current fiscal year. Furthering its strategy of building higher visibility in its markets outside India, the APMEA operations opened its first Apollo Zone in Kuwait. The outlet is designed to provide customers with an enhanced retail experience for the brand and products displayed.
Given the importance of building a strong brand, the company expanded its sponsorship agreement with Manchester United to cover many markets in the APMEA region. In India, it continued to ramp its branding presence with a high-decibel brand campaign “Performance: There are no Shortcuts” during the year.
The company’s multi-product strategy, supported by its two-brand strategy, has helped the region cross significant milestones. In India, Apollo Tyres became the first company to cross the 100,000-mark in truck bus radial (TBR) monthly sales in March last. The strategy on investing in the radial technology is paying dividends as the company grew at a healthy clip of 30.8 per cent. The TBR exports story was no different for the company as it grew by 53 per cent. While the truck bus bias (TBB) saw the expected decline, the APMEA operations’ strategy of looking at new markets paid dividend as exports in the segment grew by 14 per cent.
In the replacement passenger car segment, the operations saw tepid growth, but this was slightly offset by the higher than industry growth in the OE segment as the operations increased its market share in the OE segment to 21 per cent. The EA operations managed all odds including slow market demand, influx of low cost products and lower sales prices to marginally exceed the net sales in FY15 in Euro terms. The operations accounts for 28 per cent of Apollo Tyres’ consolidated revenue. In terms of volume, passenger car tyre sales grew by four per cent, spare tyres sales by 12 per cent and agriculture tyres sales marginally by two per cent. The operations gained market share in agricultural tyre and saw a marginal rise in the passenger car tyre category.
Across the year, new sizes in Vredestein agricultural and Apollo industrial tyres became available, including the launch of Vredestein Endurion and Vredestein Traxion Versa at the SIMA in Paris, February 2015. During mid-2014, the EA operations initiated a road show and visited construction and rental companies as well as tyre and machine dealers to create and increase the brand awareness for Apollo Tyres.
R&D focus
A sharp focus on marketing, coupled with sustained investments in R&D, is the mantra for Apollo’s next level of growth. The company does not believe in a ‘one size fits all’ philosophy, and it is important to provide products suiting the market requirements. R&D is providing the impetus to take forward this mindset. Apollo’s dedicated R&D centres for passenger and commercial vehicle tyres have sharpened their focus on various product categories and helped launch new products that are in tune with the customer needs. For example, last year the manufacturer launched a new cross ply technology based tyre, AWR-HD with the Apollo HDF technology, for the Indonesian market.
Growing sustainably
In order to achieve its goal of becoming a preferred global brand in the tyre industry, Apollo is continuously seeking to develop sustainable technologies and products that reduce risks and increase value for its stakeholders.
The company focuses on research and development of new materials, compound development, design and simulation that makes its products more competitive and environment friendly.
Tyre weight optimisation without compromising tyre performance is a priority for the company which optimised the material usage by two per cent for its high performance and ultra-high performance tyre range in the reporting period. This meant reduction in total material used. Through this innovation, the company also saves energy and lowers rolling resistance which, in turn, lowers fuel consumption of vehicles and reduces their CO emissions.
The company is increasingly using silica as reinforcement material in place of carbon black, which is produced by burning petroleum oil in developing new tyres. This helps it cut down the use of fossil fuel. Besides, tyres with silica reinforcement give better fuel efficiency for vehicles, thereby reducing CO emission. Ford’s upcoming vehicles will be using the product range, Apollo 3G Maxx.
The company has invented a new tread compound with the carbon black reinforcing material whose performance in regards to rolling resistance is equivalent to that of the silica tread compound. This gives a winning edge to increase tyre fuel efficiency without compromising in manufacturing cost. This invention fulfils the OE requirements in the Indian market. The target for the coming years is to further improve the label values of the existing product lines.
Apollo Tyres acquires Reifencom GmbH
Apollo Tyres has announced the acquisition of Reifencom GmbH, one of the largest tyre distributors in Germany, for Euro 45.6 million. Reifencom GmbH has an online presence in six countries – Germany, France, Italy, Austria, Switzerland and Denmark. In addition, it operates 37 stores and service centres across Germany.
Commenting on the acquisition, Mr. Neeraj Kanwar, Vice Chairman and Managing Director, Apollo Tyres Ltd., said: “The acquisition is a strategic fit in further growing our European business. It will enable Apollo to improve its mix of distribution channels in Germany and Europe and aid in increasing the visibility of Apollo and Vredestein tyres in the offline and especially the fast growing online retail space.”
The success of Reifencom GmbH is attributed to its highly efficient logistics system that ensures that there is guarantee of availability of all kinds of tyres and rims even during busy periods like spring and autumn. With an objective of providing world-class products and services, and that too at very competitive prices, Reifencom GmbH procures tyres and rims from leading manufacturers, thereby ensuring top quality.
“It is our privilege to join hands with Apollo Tyres where the team shares our passion for providing world-class products and customer service,” said Olaf Sockel and Heiko Knigge, Managing Directors, Reifencom GmbH.